Law requiring advocates to snitch on clients dealing in dirty money takes effect early March amid flagging of the country as a ‘wash wash’ hub.
The Anti-Money Laundering and Combating of Terrorism Financing (Amendment) Act, 2023, will roll into effect from March 15, 2024, designating law firms as reporting entities and will have to file their reports through their lobby LSK.
The law requires that the advocates inform the centre about clients doing transactions worth more than Sh1.5 million but have the liberty of continuing with the transaction and earn their keep.
While reporting, however, they are prohibited from letting the client know, as this will be deemed tipping off and is punishable in law.
The Financial Reporting Centre is the state agency tasked with identifying and combating money laundering and financing of terrorism.
The change in law only happened after a seat-edge negotiation between the lawyers and the centre resulting in a memorandum of understanding in August 2023 that has riled up the legal profession, turning the younger ones against the seniors whom they accuse of having blocked their path to making big money.
The MoU arose after lawyer Mwaura Kabata sued to stop the amendment process, complaining that it was restrictive on the work of lawyer. The dialogue saw the case withdrawn.
An explainer note sent by the LSK leadership to all advocates explains that the MoU was aimed at amending the POCAMLA Act, 2009 to incorporate the consensus reached in the negotiations in the petition, which challenged the inclusion of lawyers, notaries and independent legal professionals as reporting institutions under the Act.
It was also to amend the LSK Act to grant the LSK with supervisory powers over advocates in enforcing anti-money laundering law and countering terror financing measures in the legal profession.
The explainer says that as part of the give and take, the lawyers did not walk empty-handed after they insisted a provision be made in law to ringfence some services to be rendered by advocates exclusively, edging out other professionals.
“To enable advocates, undertake their AML obligations under the POCAMLA effectively, the LSK successfully leveraged for, services under section 48 of the POCAMLA, including buying and selling of real estate; formation & incorporation of companies and trusts, be undertaken exclusively by advocates within the meaning of the Advocates Act,” it reads.
“This aspect is crucial in operationalisation of reporting obligations in services stipulated under section 48 of the POCAMLA as it secures these legal services for advocates and restricts the offering of these legal services which should be strictly undertaken by advocates as intended by law.”
“Unqualified individuals and masqueraders have been in the business of offering these legal services which has enabled prospective money launderers alternative channels to launder money.”
The society also assured lawyers that the agreement did not set them up against their clients, dismissing the claims that it will violate the sacrosanct attorney-client privilege.
“This negotiated regime protects advocate-client confidentiality since advocates will be required to report to the LSK which will act as a link to the FRC. They will not report directly to the FRC and LSK will only report suspicious transactions, once determined. In this regard, the Society has been designated as a self-regulatory body,” it said.
The MoU provides that where an advocate has sought to dissuade a client from engaging in illegal activity, this shall not amount to tipping-off, it said.
“The MoU provides that advocates are not required to report suspicious transactions if the relevant information was obtained in circumstances where they are subject to professional secrecy or legal professional privilege,” it said.Jitter
